Term 3: Our Economy (Slides 1)

Question 1

What is scarcity?

Answer 1

scarcity is the question of satisfying UNLIMITED WANTS with LIMITED resources.

Question 2

What are the economic resources?

Answer 2

• Land
• Labour
• Capital
• Enterprise

Question 3

What are the economic resources?

Answer 3

• Land
• Labour
• Capital
• Enterprise

Question 4

What is the size of an economy measured with?

Answer 4

GDP (Gross Domestic Product)

Question 5

What is GDP?

Answer 5

GDP is the total value of all goods and services produced in the economy in a single year.

Question 6

What does the Economic Model Show?

Answer 6

Shows the flow of money between sectors of the economy.

Question 7

What does the Business Cycle Show?

Answer 7

Tracks GDP of an economy over time.

Question 8

What are the sectors of the economic model?

Answer 8

1. Households Sector
2. Firms Sector
3. Financial Sector
4. Government Sector
5. Overseas Sector

Question 9

S + T + M =

Answer 9

S + T + M = I + G + X

Question 10

MEMORISE ECONOMIC MODEL DIAGRAM (NO PHOTOS ON BRAINSCAPE)

Answer 10

MEMORISE ECONOMIC MODEL DIAGRAM (NO PHOTOS ON BRAINSCAPE)

Question 11

Injections are _________

Answer 11

Injections are expansionary

Question 12

Injections are _________

Answer 12

Injections are expansionary

Question 13

Injections are _________

Answer 13

Injections are Expansionary

Question 14

Leakages are _________

Answer 14

Leakages are contractionary

Question 15

What are the different injections?

Answer 15

(I) business investment
(G) government expenditure
(X) exports

Question 16

What are the different leakages?

Answer 16

(S) savings
(T) taxation
(M) imports

Question 17

How do you know if a government has a deficit or surplus?

Answer 17

(T) taxes - (G) government spending = deficit or surplus

Question 18

When does a government have a deficit?

Answer 18

A deficit occurs if taxes are insufficient to cover government spending in a financial year.

Question 19

How does the government pay for deficits?

Answer 19

Debt (mainly)

Question 20

When does a trade deficit occur?

Answer 20

A trade deficit occurs if imports are more than exports.

Question 21

Net Exports (NX) =

Answer 21

Net Exports (NX) = Exports (X) - Imports (M)

Question 22

MEMORISE BUSINESS CYCLE DIAGRAM (NO PHOTOS ON BRAINSCAPE)

Answer 22

MEMORISE BUSINESS CYCLE DIAGRAM (NO PHOTOS ON BRAINSCAPE)

Question 23

What is a contraction? (business cycle)

Answer 23

decreasing economic activity (GDP)

Question 24

What is an expansion? (business cycle)

Answer 24

increasing economic activity (GDP)

Question 25

What is a recession? (business cycle)

Answer 25

2 quarters of falling GDP

Question 26

What is a depression? (business cycle)

Answer 26

4 quarters of falling GDP (sustained recession)

Question 27

What is the main economic problem during a recession?

Answer 27

not enough spending.

Question 28

What is the main economic problem during a boom?

Answer 28

too much spending.

Question 29

What are the key indicators of economic contraction?

Answer 29

• falling levels of production (output)
• decreasing consumer spending
• rate of inflation may fall
• wage rates generally fall
• interest rates eventually fall
• level of unemployment rises

Question 30

What are the key indicators of economic expansion?

Answer 30

• rising levels of production (output)
• increasing consumer spending
• rate of inflation may rise
• wage rates generally rise
• interest rates eventually rise
• level of unemployment falls